SAB/Miller deal is said to be imminent.

AP--Miller Brewing Co. will be sold to a foreign brewer in a S5 billion deal, creating the world's second-largest brewer, the Milwaukee Journal Sentinel reported last week.

The Journal Sentinel, citing unnamed beer industry sources, said London-based South African Breweries PLC, the world's fourth-largest brewer, will acquire the Milwaukee-based Miller, the nation's second-largest brewer. The combined company would trail only Anheuser-Busch in size.

The announcement of a deal might come on Thursday, May 30th (after press-time for this issue) when SAB announces its fiscal year results.

Scott Bussen, a Miller spokesman, declined comment on the report when contacted by The Associated Press.

Miller's current owner, Philip Morris Cos. Inc., and South African Breweries have acknowledged discussing a merger. The merger would leave Philip Morris with about a 30 percent stake in the new company.

Miller's corporate headquarters, with around 1,000 employees, is expected to remain in Milwaukee, sources told the Journal Sentinel. The newspaper also reported Miller's breweries, which employ 900 people, are expected to remain open.

Miller, founded in Milwaukee in 1855, has seven breweries in the United States.

For South African Breweries, the deal creates a huge new U.S. customer base, breaking the company out of its traditional base in Africa.

Miller, with about $4.2 billion dollars in annual sales, would be South African Breweries' biggest move in a Western market. The company has expanded internationally with about a dozen purchases since 1999.

SAB had one previous brief foray into the U.S. market in the 1980s (during apartheid) when it owned Latrobe Brewing Co. of Latrobe, PA, using a front company.

In addition to acquiring such well-known Miller brands as Lite, Genuine Draft and High Life, South African Breweries would gain access to Miller's large U.S. distribution system for its chief international brand, Pilsner Urquell.

British press reports said that the London-based SAB is hopeful of completing its cash and share deal with Miller Brewing's owner Philip Morris by the time it announces fiscal yearend results.

According to the British press, the two sides are still working out the fine details of the deal expected to give Philip Morris a 33 percent stake of the combined brewing group with SAB paying the U.S. group around $2 billion in cash and a further $3 billion in equity.

According to analysts, the 60-40 equity-debt split of the deal is being structured due to SAB's inability to put up more cash, and partly so that Philip Morris can limited its tax liability on the deal.

SAB, which brews Castle and Pilsner Urquell beers, is expected to issue around 375 million shares to raise the $3 billion equity payment, and Philip Morris may agree a "lockup" time period when it can not sell down its stake in the combined brewing operation, sources told Reuters.

Once the deal is clinched, SAB execs will try to assuage market fears that SAB could fail to turn Miller around. SAB will fly to emphasize the efficiency benefits of the deal. However, there is little geographic overlap between the two brewers, so these benefits would be limited to some minor synergies, like using the Miller distribution system to market SAB's Pilsner Urquell in the U.S.

However, analysts are pleased that the deal will reduce SAB's reliance on earnings made in the weak South African rand, while balancing steady earnings from Miller in the United States with the more unpredictable earnings from SAB operations in emerging markets.